Business Succession Book

HUM A N R E S O U R C E S T R AT E G IES FOR EMPLOYERS
Leaving Your Small Business:

Your plan for a successful transition
This book is for

Alberta business
owners with 50 or
fewer employees who
are considering a change in the ownership or management
of their business immediately or within the next few years.
It will help you:
understand the value of having a succession plan and the
steps involved in developing a succession plan
assess where you are in the succession planning process
begin building a succession plan for your business
connect with further information and resources.
This publication is available on-line through the Alberta
Learning Information Service (ALIS) websiteAlbertas
leading on-line source for career, learning and employment
information. To access this and additional publications, visit
www.alis.gov.ab.ca/careershop
For copyright information contact
Alberta Employment, Immigration and Industry
People, Skills and Workplace Resources
Telephone (780) 422-1794 Fax (780) 422-5319
E-mail info@alis.gov.ab.ca
To order print copies

Internet www.alis.gov.ab.ca/careershop

Catalogue Item #675142
This information was accurate, to the best of our knowledge,
at the time of printing. Labour market information
and educational programs are subject to change, and
you are encouraged to confirm with additional sources
of information when making career, education and
employment decisions.
ISBN 978-0-7785-5387-8
2007 Government of Alberta

Employment, Immigration and Industry
This material may be used, reproduced, stored or
transmitted for non-commercial purposes. However,
Crown copyright is to be acknowledged. It is not to be
used, reproduced, stored or transmitted for commercial
purposes without written permission from the Government
of Alberta, Employment, Immigration and Industry.
This publication is not for resale unless licensed with
Government of Alberta, Employment, Immigration and
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publication and to comply with Canadian copyright law.
The publisher would welcome any information regarding
errors or omissions.
Government of Alberta, Employment, Immigration
and Industry publications may contain or reference
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parties (third party material), identified with a credit to
the source. This does not grant the user a licence or right
to that third party material. Users who wish to reproduce
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permission from that third party.
04/2007 25M
L e a v i n g y o u r s m a ll b u s i n e s s : y o u r p l a n f o r a s u c c e s s f u l t r a n s i t i o n
Table of Contents
Introduction......................................................................... 2
Who is this publication for?....................................................... 2
What is Business Succession Planning?............................. 3

Business succession planning is a process................................ 3
Why Plan for Business Succession?.................................... 4

Reasons to develop a business succession plan....................... 4
Protect years of hard work.................................................................

Keep a vital service in your community..............................................
Build value.........................................................................................
Provide financial security...................................................................
Avoid the chaos of unexpected change...............................................
Prepare for the future.........................................................................
4
4
5
5
5
5
How to Develop Your Business Succession Plan............... 6

Succession plan framework and checklist................................ 6
Six steps to building your business succession plan............... 6
Step 1. Initiate discussion with stakeholders...................................... 6

Step 2. Assess current circumstances of
your business and take inventory...................................................... 7
Step 3. Develop your advisory team................................................... 7
Step 4. Write your plan....................................................................... 8
Step 5. Implement your plan........................................................... 14
Step 6. Review and modify your plan............................................... 14
Next Steps.......................................................................... 15
Resources for Employers and Business Owners.............. 16
General business publications................................................. 16
Alberta Employment, Immigration and Industry............................. 16

Other relevant resources.......................................................... 18
On-line resources............................................................................. 18
Publications..................................................................................... 18
Appendix: Succession Planning Templates...................... 19
Succession Plan Framework and Checklist.............................. 20
Action Plan and Progress Chart............................................... 22
Government of Alberta
l e a v i n g y o u r s m a ll b u s i n e s s : Y o u r p l a n f o r a s u c c e s s f u l t r a n s i t i o n
Introduction
Who is this publication for?
This publication is for Alberta business owners
with 50 or fewer employees. It was developed
for small business owners considering a change
in ownership and management of their business
in the immediate future or within the next few
years. It will get you thinking about planning
for tomorrow so that when tomorrow arrives,
there are no surprises. Use this guide to help
you understand what succession planning is,
why you should do it and how to develop your
succession plan.
In October 2006, the Canadian Federation of
Independent Business (CFIB) reported that
about a third of Canadas independent business
owners plan to exit their business within the
next five years, either selling, closing or passing
it on to a successor. However, the report also
states that the majority of current owners are
not adequately prepared: only 10 per cent have
a written plan, 38 per cent have an unwritten
plan and 52 per cent have no plan at all.1 How
prepared are you?
Did You Know?

Start planning today. The best time to begin is
now, regardless of when you plan to retire. Delaying
succession planning reduces your options that could
be detrimental to both your business and retirement
needs. The lack of adequate time to plan and
execute succession is a significant contributor to failed
successions. The perception that succession can occur
over a relatively short period is a significant barrier to
overcome.*
*Succession Can Breed Success, p. 9. Canadian Federation
of Independent Business, June 2005.
Available at www.cfib.ca/research/reports/rr3007.pdf
Canadian Federation of Independent Business.

Succession Can Breed Success. Survey report, June 2005.
1
What is Business Succession Planning?

Business succession planning is a process.
A business succession plan is one component of an
overall business plan and strategy. Fundamentally,
succession planning is a process that prepares you
and your business for transition, whether planned or
sudden, including the sale, closure or transfer of your
business. You may already have some components of
a succession plan in place. For example, taking care
of insurance needs (such as life, key person or critical
illness insurance) is part of succession planning.
Did You Know?

Small business means big business in Alberta.
Ninety-seven per cent of Alberta businesses are small
establishments and 35 per cent of employed Albertans
work in these establishments.
*Small Business ProfileAlberta, p. 1.
CFIB Research, April 2006.
Available at www.fcei.ca/legis/alberta/ab_misc.asp
A business succession plan is a living document that

helps guide decisions around ownership, leadership,
business structure, tax strategies and contingency
plans. As a working tool, it can also help you prepare
for retirement, with considerations of not only your
business legacy but also your retirement needs. It is a
document that you can, and should, review annually
or as needed. This will ensure your current business
operations align with changing environments in
your community or business sector, as well as in your
personal or family circumstances, as you plan your
transition or exit.
There are several steps to developing a business
succession plan. These steps can take from several
months to several years to complete, depending on
the needs and size of the business. The result will
be a clear, detailed plan that will help you ensure a
successful exit from your business.
Why Plan for Business Succession?

Reasons to develop a business succession plan
The benefits of having a succession plan range from
improved relationships with employees and business
partners to increased value of your business to fostering
family harmony. Data in the 2005 CFIB survey report
Succession Can Breed Success indicate the benefits of having
a succession plan as reported by small- to medium-size
business owners in Canada. These benefits are illustrated in
Figure 1.
Additional reasons for having a succession plan could

include some or all of the following.
Protect years of hard work
As an entrepreneur, you have likely put your heart and soul

into your business, working long hours and making many
sacrifices. Is your legacy to create a business that will provide
you and your family financial security for the years that
follow business ownership? Is it to create a business that
can continue to operate efficiently after you have passed the
torch? Likely its both! Developing and implementing a plan
helps assure you will achieve your personal and business
goals. Planning for your business succession will help protect
all your years of hard work.
Keep a vital service in your community
Your small business could be big business in your

community! Does your business provide a vital service in
your community? Have you thought how closing your
business tomorrow could affect your community? How
many families in your community rely on the existence
Canadian Federation of Independent Business.

Succession Can Breed Success. Survey report, June 2005.
2
of your business and would be affected if you simply

closed shop? These are relevant questions to consider when
planning your transition.
It may be that your business can no longer be sustained in
your community. If this is so, planning will provide options.
For example, you might decide to liquidate goods over a few
months or you might sell off assets to interested businesses.
Generally this will provide a return to you greater than
simply closing shop.
Prepare for the future
A succession plan gives you the opportunity to share your

vision of the future with your important stakeholders.
And, by carefully working through all components of the
succession process, you can provide a business blueprint
for your key employees to follow. This ensures a smooth
transition of the ownership and continuance of leadership of
your company.
Now its time to start planning for your successful transition.
Build value
You can prepare your business for transition by examining

critical processes and operations before you sell. Examining
key processes such as procurement, e-commerce and
accounting, for example, allows you to improve or
standardize these areas so they become more efficient.
Efficiency will build value in your business. Are there
areas in your business that could be improved? If so, can
technology help you improve performance in these areas?
Take time to do an assessment, then decide if taking action
to improve business performance, processes or operations
will create more value, leaving you a more attractive business
to sell.
Provide financial security
Succession planning takes your financial future and that

of your family into consideration. Developing your plan
early to include estate planning, tax implications and other
contingency plans will secure financial peace of mind for
you, your family and your business stakeholders.
Avoid the chaos of unexpected change
Preparing the business

I would like to wind down from the business in about 10
years. Talk of transitioning the business has caused me to
begin thinking not only about the business future but also
my own. How much am I relying on the business to support
my retirement? What will we need to retire comfortably?
Is it realistic to think the business will be purchased?
What would we be selling? Where is the value in the
business? What would make the business attractive to a
buyer? I realize that planning must begin now to carefully
position the business so we can get top value in 10 years
time or possibly sooner. Taking the time now to set up
and implement better project management systems and
processes as well as updating and using technology would
position the company better for growth and is a good
starting point. These systems will also help me to begin to
share what is inside my head so people will rely less on me.
Owner, Edmonton, Construction Company
Unfortunately, emergency succession planning often

happens when there is sudden unexpected change such as
an unexpected illness, an accident or death of the business
owner or senior manager. This often leaves huge challenges
for those who are unprepared to take over the business.
Although succession planning cannot predict the future, it
certainly can help you prepare for it.
How to Develop Your Business Succession Plan

There are many different approaches to developing a succession plan.
Your personal approach will depend on your time and
resources. Regardless of the approach, the following section
outlines six main steps to help you take action and develop
your own plan.
You can tackle your plan in bits and pieces, one step at a
time. The key is to keep at it until you have developed and
implemented those components that are important for the
successful transition of your business.
Succession plan framework and checklist

This checklist helps assess where you and your business are
in the planning process. Once completed, you will have a
prioritized list of topic areas to develop in your succession
plan. Remember, you can break the process into
manageable steps!
Review the Succession Plan Framework and Checklist

template (found in the Appendix or on-line at www.
alis.gov.ab.ca/careershop).
The following six steps will help you develop your plan.
Six steps to building your

business succession plan
Step 1: Initiate discussion with stakeholders.
Who should you talk to? Begin by speaking with your

business partners, your spouse, children, other family
members and key stakeholders such as employees and
managers to learn what they think and how much they
understand about succession planning. Take notes so you
can take action based on needs.
Family special considerations
Whether your immediate family members play an active
role in your business or not, they should be included in
the initial planning. This allows everyone an opportunity
to voice their opinions and concerns. Your business may
consist of family shareholders, family members as employees
or children thinking about working for the business. By
communicating with them early in the process, you will
ensure that all are heard. As well, roles, responsibilities and

expectations can be put on the table. Do you know what
each family member expects from you and the business?
Finding out now will prevent surprises down the road.
According to the Business Development Bank of Canada,
there are many ways you could involve your family:
Sound them out during a family retreat or in
one-on-one sessions.
Hire an outside consultant to interview family members.
They may be more willing to talk to an impartial outsider
than to you.
Create a family council to develop a common vision and
help draft the succession plan.3
To learn more about family business considerations, refer to
the resource section at the back of this publication, where you
will find several publications listed that focus on family. You
will also find a list of organizations that can provide advice
and direction on transition planning for a family business.
Step 2: Assess current circumstances of your
business and take inventory.
Since most small business owners are planning to use their

business to help fund their retirement, it is essential that
you know your current asset base as well as your liabilities.
Understanding your financial position will better assist you
in preparing your business valuation and determining the
most effective business structure. It is as simple as making a
list of what you own and what you owe, as a starting point.
Your accountant or estate planner can offer other tools and
advice.
Advisor advice
I have been practicing accounting since the 1970s and can
make one generalization about business owners planning their
exit from their businessprocrastination! While there are
several reasons owners providetoo busy, too early, Ill never
retireone reason to be proactive is more compelling: tax
implications. Most small business owners do not understand
the tax implications of selling their business. This is where
the advice of their professional advisors is key. For example,
if the sale of their business includes the business assets, the
land and the building, the owner could be looking at a large
capital gain. If owners considered future tax liabilities when
growing their business, they could incorporate strategies to
reduce the immediate tax payments on the sale. This needs
to be done years in advance. Strategies involving corporate
reorganizations should be discussed with the owners
professional advisors. Taking time to learn how to organize the
business should result in maximizing the return on investment
when the owner exits the business.
Owner, Professional Firm, Rural Alberta
Business partners
Discussions with all of your business partners are important
in the planning stage. Address the following questions at the
start of your planning process:
Do you understand what your partners future
intentions are?
Will there be a buyout?
Step 3: Develop your advisory team.
Is there a buy-sell agreement that needs updating?
Regardless of the size of your business, you will need a team

of trusted advisors to help you plan your succession. Your
team will be as small or as large as your planning priorities
dictate.
Should you revise your shareholders agreement?
The benefit of having an advisor, whether it be an

accountant, lawyer or business advisor, is to get timely
advice. Advisors will also keep you on track. Consider how
each of the following professionals can help you with your
business.
Are members of your family also partners?

Do your partners have family members involved in
your business?
What are your partners expectations around retirement?
BDCBusiness Development Bank of Canada. Make it work for your family.

Available in the Transition Planning Project at www.bdc.ca/transition
3
Corporate or tax accountant

You likely have either an internal or external accountant that
knows your business. Accountants are fundamental to your
succession team and should be advised of your planning
intentions. They can help assess your business financial
picture so that you can plan your next steps. Accountants
can help you with the following:
valuation of your business
tax liability planning
estate planning
corporate restructuring of your estate
exit strategies.
Corporate lawyer
Corporate lawyers can help develop your shareholder
agreements, buy-sell agreements, estate plans and/or
settlement trusts and settle disputes if they arise. They are
important players in developing your ownership structure
and can advise on legal risks.
Banker
Have you thought about the purchase options for a
successor? Your banker can help you determine how you
might financially assist a successor with the purchase of your
business.
Business advisor or succession co-ordinator
Business advisors allow you to focus on your daily business
while working through the process of planning. Like a
quarterback on a football team, they facilitate the plays in
your succession planning. They can also coach you and your
family through difficult times during the succession process.
Insurance advisor
Your insurance advisor will help you determine your
insurance needs and solutions. Insurance considerations
include business insurance, life insurance, disability
insurance, critical illness insurance and key person
insurance. Did you know your business could hold a life
insurance policy on you? Insurance can support your

business in several circumstances, including:
creating liquidity for retirement
funding a buyout
providing financially for your family upon your death
providing financially for your family upon your critical
illness or disability
providing a business will to ensure immediate continuity
of the business.
Step 4: Write your plan.
Now you have an idea about preparing a succession plan:

what to do, who needs to be involved and how others will
be involved.
The next step is to begin writing your plan. Although each
succession plan is unique, there are 12 critical components
that create a complete and effective plan. While we have
provided the critical components in this guide, not all
elements of a succession plan are covered. You may wish
to consult with an advisor for more detailed work on your
plan. You will want your plan to include everything that is
important to you, your family and your business. Use the
information you gathered from completing the Succession
Plan Framework and Checklist (found in the Appendix and
on-line at www.alis.gov.ab.ca/careershop).
Personal and business goals and objectives
As you begin writing your plan, you will need to identify
what it is you want: your personal and business vision,
goals and objectives. Take your time during this step. It is
important to crystallize what you see for yourself and your
business future, even if that is many years away.
Consider these questions when developing your personal
and business goals and objectives:
What is your personal vision for the future?
What do you dream of and where do you hope to be in
five years? In 10 years?
Would you say you are on track to achieve your goals?
Where does your business fit into this?

Do you have a vision of the legacy you want to leave?
What resources do you need to help you and the business
get where you want to go?
If you have a successor in mind, does that person have the
same expectations and vision for the business?
SMART goals
With the information you have collected, determine
SMART goals for yourself and your business: goals that are
Specific, Measurable, Attainable, Realistic and Timely.
After you have some clear goals and objectives, the next step
is to consider possible exit strategies. What are your options
for the successful transition of your business?
Exit strategy
There are several options for leaving your small business.
One that commonly comes to mind is putting a For Sale
sign in the window. This can be a limiting choice for
owners. Unfortunately, if there has been no planning, this
may be the only choice available.
Your professional advisors can give you advice on what will
maximize the value of your business while considering both
your personal and business needs. Consider the following as
possible exit options.
Business exit strategy options
The Business Development Bank of Canada (BDC) has a
wealth of succession planning information on their website
(www.bdc.ca/transition). A BDC consultant explains some
common business exit strategies:
Passing the business to another family member. This
requires identification of likely candidates and then
training them to manage the business successfully. This
could involve some time, depending on the complexity of
the business.
SMART Goals
S = Specific: Goals should be clear and state your desired
results. By probing questions around who, what, where,
when and why, you will be able to move from general to
specific goals.

General goal: To put more money into my pocket when

I leave the business.
S
pecific goal: To decrease the business tax implications
by eight per cent in one year by reorganizing the
company into a holding company and an operating
company.
M = Measurable: How will you measure your desired results?

Measuring your progress will let you know if you are on
track. Measurables can include days, years, dollars saved or
dollars spent.
decrease business taxes by eight per cent in one year.
A = Attainable: Can you reach the goal you set, given the
competitive environment and the human, financial and
possibly technological resources required? For example, can
the business reduce taxes by eight per cent in one year?
R = Realistic: Is this goal a stretch? Is this goal something the
business can do? Is reducing tax implications a true result of
reorganizing? Goals like this may require professional advice
from an accountant and a lawyer.
T = Timely: Does the goal state a deadline? The example states
one year. Can you develop a time frame to track milestones?
For example, the goal could be broken into smaller
measurable time frames. A milestone would be:
to meet with the lawyer within one month
to set up a holding company.
1 0 l e a v i n g y o u r s m a ll b u s i n e s s : Y o u r p l a n f o r a s u c c e s s f u l t r a n s i t i o n
Selling the business. Businesses must be prepared for

sale so that the owner can maximize his or her return.
Simply making superficial changes to a business at the
last minute and putting it on the market for sale often
results in reduced return. Usually a sale requires a long
strategic management process that produces evidence of
growth potential and is attractive to potential buyers. In
addition, likely buyers should be identified ahead of time
and alliances or overtures made before the actual event. A
version of selling a business involves simply closing it and
selling a client list, or book, to a competitor.
Management buyouts or employee buyouts. Often this is
the first place that owners, who do not have a candidate
for succession, look to in order to pass on the business.
This method is often used when the business owner is
concerned with continuance of the corporate culture.
Usually, in these cases there are legal processes, such as
arrangement of shares, which must be taken care of first.
Takeover or phased exit. This often occurs when an owner
wants to leave a business, but does not completely exit.
It is also a method for slow transference of a business to
a new owner who is still undergoing a training period.
With this method, the owner sells a stake in the business
to a partner and the stake grows as the partner takes on
increasing managerial responsibility.4
Business valuation
Before you sell or exit your business, you will want to be
explicit about what your business is, what you are going
to sell and how much it is all worth. This might sound
simple enough, but often business and personal lives are
intertwined. When valuing the business, you need to
consider your business revenues, assets, property, business
liabilities and goodwill. Goodwill is an intangible asset
that can be difficult to assess. It represents the value of
a corporations brand name, customer service, employee
morale, expertise and other factors beyond net assets that
contribute to the value of the business. Consult an advisor
to determine the goodwill value of your business.
There are several different methods to determine the value
your business. You might tackle it on your own. Or, your
accountant could provide you with advice on what method
would be most useful for your business. The method you use
will depend on the business financial picture, asset mix and
business structure. Several books on business valuation are
included in the resource section of this guide. Here are some
questions to consider:
Where is the value in your business?
What is the value of your assets?
Do you own property, buildings and machinery?
Have you thought about your business liabilities?
General succession experience

I consider myself an entrepreneur at heart. I enter into a
business arrangement with an exit strategy: sell. My plan is
always to sell out when the timing is right. When you are
considering the succession of your business, the successor you
select should have similar values. This will ease the process.
Trust is paramount but often difficult in a succession. Work with
professional advisors who you trust are providing advice that is
in your best interest.
Entrepreneur, Chemical Distribution and Service,
Innisfail and Medicine Hat
How will you determine what you will sell?

What is the goodwill value in your business?
Business structure and organization
Are you a sole proprietor? Do you have a partnership with
general or limited liability? Is your business a corporation?
How your business is organized will depend on the business
maturity and size. Clearly understanding the business
ownership structure and its implications is important when
considering your exit from the company. When you plan
transition years before your retirement, you can restructure
the ownership and consider all tax implications and legal
liabilities. By giving yourself time before exiting, you can
improve the operational efficiency of your business and
optimize its value.
BDCBusiness Development Bank of Canada. Transition Planning top questions.

Available at www.bdc.ca/transition
4
If you were looking from the outside in, would your

business get an excellent bill of health? Are you using
technology to your advantage? Are the processes efficient
and effective? Does much of the knowledge of the day-today operations reside in your head? If you are considering
selling your business, you need to record that operational
information and any other information important for
other stakeholders to know. You will want to document
all company policies and procedures. Your records and
documents should be in an organized system.
Tax and legal considerations
You will want to get advice about tax and legal matters such
as the following:
Tax considerations
- Will your business qualify for the capital gains
exemption?
- What are your options to trigger the exemption?
11
While planning your estate is a similar process to business

succession planning, it also considers all your personal
property. It can include your stocks, bonds, cash, real estate,
business interests, life insurance, retirement benefits, other
assets and your registered retirement savings. Costs of estate
settlements can be high. They could include insurance
settlements, tax liability, fees for professional advisors, as
well as costs for share purchase, setting up trusts, probate
and more. Your will, enduring power of attorney and
personal care directive are some of the things you will want
to consider. Professional advisors will provide you with
sound advice on these matters.
You can find more information on estate planning at:
RBC Dominion Securities website at www.rbcds.com
(select Estate Planning)
Cataract Savings and Credit Union website at
http://develop.danima.com/estate
- What can you do to minimize tax implications?

- Will there be an estate freeze?
Legal considerations
- I s your business set up as a sole proprietorship,
partnership or corporation?
- Is it a family business?
-A
re you selling assets and goodwill or shares?
- Do the liabilities get sold with the business?
- Do you have a conflict resolution policy?
Estate plan
As a small business owner, you likely have a large volume of
assets in your business. While your organizational structure
may protect your assets, your sudden illness or death could
be devastating to those who have to piece together your
estate puzzle. We all think we have time to make a plan for
our estate, but accidents do happen and illness can strike
suddenly. A plan for your estates future will help conserve
the assets you have accumulated during your business
lifetime. If you do not have a plan, someone else may take
care of your estate for you. But their plan may not be what
you had in mind for your business.
Selecting, training .
and mentoring a successor
For me, owning and operating my business is about
stewardship. My parents started this business in the 70s and
I started working right after high school. I worked in every
area to learn all aspects of the business. My parents also had
me work for other people so I could learn how to work. This is
important for several reasons, including developing the respect
of colleagues and employees. When I realized I loved the
business and wanted to grow with the company, a grooming
process for leadership and ownership began. It spanned
several years. My parents, as well as my fathers colleagues,
have been my mentors. I learned that its important to really
listen and learn from the business owners because so much of
what they know is not written anywhere. For us, the transition
was smooth because my parents prepared me well and I had
developed the trust of my employees and colleagues. We share
the same values and vision. I am in a leadership role today and
share ownership with my mother.
Successor, Exhibit Service Industry, Calgary and Edmonton
12 l e a v i n g y o u r s m a ll b u s i n e s s : Y o u r p l a n f o r a s u c c e s s f u l t r a n s i t i o n
Successor selection
Although the grand finale of the planning process is passing
the torch, selecting a successor is often a difficult task. It is
also one of the most critical steps of this journey. You will
want to begin considering this years before you exit your
business. Determining what qualities and competencies
your successor needs is a good start. You may have already
identified a successor (e.g. a family member, employee or an
outside buyer), but does the potential successor know? It is
important to select a successor early in order for that person
to learn the business and earn the trust and respect of other
key stakeholders.
Finding and keeping a successor

One of the critical issues to consider as a small business owner
in a town is finding someone interested in becoming a business
owner. Business owners should be planning early and making
back-up plans in case the first choice does not work out. Owners
need to put together an incentive package that will attract and
keep great employees. My own transition into ownership took
several years. I began in my youth as an employee, then became
a partner and now I have full ownership. Full ownership took
decades. When I realized none of my children would become
my successor, I began grooming a long-time employee. Due to
unforeseen events, this did not work out and I did not have a
back-up plan. Now I am looking at other alternatives for exiting
my business. Therefore, I think it is also important to be aware
of your options and how each of your options will best help you
meet your goals for exiting your business. Alternatives include
preparing another staff member, advertising the business for
sale or a systematic closing out of the business.
Owner, Retail Industry, Edson
Your plan will depend on whether you have already selected

a successor, whether that individual is an internal or external
candidate and whether the successor is aware of your decision.
If you have not yet identified a successor, you will need to
search for and select a successor and set timelines for selection.
Have you selected your successor?
What strategies can you use to find a successor?
Have you developed guidelines to assess the potential
successor?
What skills will your successor need? (e.g. technical,
conceptual and managerial skills). Refer to the section on
successor training that follows.
How will you select among potential family successors?
How will you select among potential employee successors?
What criteria will an outside buyer have to meet?
If you do have a successor selected, have you told the
successor of your intentions? When will you tell the
successor?
When and how will you inform your stakeholders?
Successor training
It is not enough to identify your successor. You also want
to be certain that person can successfully take over your
position in the business. Identifying your successors
strengths and weaknesses will help you develop a successor
training plan. The plan may include education or training,
obtaining outside work experience, rotating through the
business to learn all aspects of its operation and engaging in
a mentoring relationship with key managers. You will also
find it helpful to have an evaluation plan to monitor the
successors progress.
Whether or not you have identified your successor, you can
begin identifying core skills and competencies the successor
will need. Some companies develop training modules
that follow a timeline. Your approach will depend on how
complex your business is.
What are the top three technical skills the successor needs?
What other competencies are desirable?
Is further education or training required?
Would working outside the company help the successor

develop critical skills?
Will you have a quick exit or a gradual, phased-out
departure?
What timeline is required to train the new successor?
What is the best way for you to transfer your knowledge
or company know-how to your successor?
Are you prepared to mentor or coach the successor?
Contingency plan
Whether we own a business or not, many of us do not
have a contingency plan. In case of an accident or illness,
a contingency plan will provide the financial resources to
ensure your business survives. It informs stakeholders how
your business will be looked after and who will be in charge.
Most of us dislike thinking about our own mortality. But
as the owner, your business depends on you showing up
tomorrow. Consider who will lead your business if you are
in an accident tomorrow. By addressing this as a priority
right at the start, you will protect years of hard work. Ask
yourself:
How will I cover costs of the business and protect my
family if an unforeseen event occurs?
What could happen to my business and my family if I
dont have critical illness, disability or life insurance?
What are my options to pay for the different types of
insurance?
Is there a plan for the flow of life insurance proceeds?
How much insurance is required?
Who else should be insured?
Who should own the life insurance?
Who should pay the premiums?
Who should be the beneficiary?
Who would lead the business if I were in an accident
tomorrow?
13
Conflict resolution
As previously discussed, stakeholders interested in the
succession of a business include more than the business
owner. People who may be considered key stakeholders
include family members, business partners and senior
employees. They may have their own interest in the plan.
Conflict can result when the succession decisions do not
satisfy all stakeholders interests. Having a pre-established
conflict resolution mechanism will help keep the process
moving forward.
Your business might already have procedures in place for this
situation. If not, you may want to get a copy of Lets Talk: A
guide to resolving workplace conflict. See the resource section
for ordering information.
Timelines
Create a timeline to develop and implement your plan to
keep you on track. Use a simple calendar or any project
management tools you are familiar with. While your
timeline should be flexible, it should also provide clear
milestones indicating when you have achieved goals,
objectives and major achievements. Consider these questions
when planning a timeline:
How will the timing of your exit affect the rest of the
plan?
Have you identified timelines if your exit is a gradual
phased-out departure?
Have you aligned the timing of your successor
development and training with your exit?
What milestones will you observe to know you are on
track? (e.g. completed Phase 1 of successor training).
How long will you remain active in the daily operations of
the company?
Have you committed to an approximate age you want to
retire?
Who is aware of the plan and knows where to find the

documents?
Having a contingency plan helps provide peace of mind!
Communications plan
Communicate your succession plan to key people in
your business. Determine how you are going to tell your
employees that you have made a critical decision about your
exit and about the successor you have chosen. This can be
an emotional time for the whole company. You will want to
keep employee morale high as the transition occurs. Notify
your suppliers and customers about your plan, about how
business will carry on and about the terms of transition.
Introduce your successor to key people in a timely fashion.
Advisors are key to succession planning

My company recently had our annual retreat and succession
planning was on the agenda. We hired a business advisor
who acted as a facilitator for the retreat and he got us
thinking and talking about issues that we wouldnt have
on our own. Our business advisor meets with us regularly
to help us move towards our succession goals. This process
is extremely valuable to any business owner thinking about
transitioning the business to family members or other
employees. Having a good accountant and lawyer is also
important. Our business transition is planned over five years
and we are working in phases. We are currently developing
training modules for the new successors. The leadership
will transfer to both of my kids. The ownership transfer will
include freezing shares to make my daughter an owner.
My son is already a shareholder. My shares will change to
preferred. Working with advisors keeps you on track.
I dont think you can do succession planning
without input from your advisors.
Owner, Employment and Training Industry, Red Deer
Importance of communicating your plan

A communications plan is a strategy for informing
your family, employees, suppliers, customers and other
stakeholders about your intentions. Here are two compelling
reasons for developing a communications plan:
Responding to fear of the unknown.
Employees, suppliers and customers can be affected by
the sale of a business. A business will not be attractive if it
begins to lose customers or uncertainty is created among
key stakeholders. Communication about the process can
dispel any fear your key stakeholders may feel.
Ensuring clear expectations.
A written communication plan states how, when and
what media will be used to announce your exit and
the transition of the business ownership. It explains
how you want to proceed with your business transition
announcement. This will help ensure your plan is
executed as you wish. You may include copies of
announcements with directions for where and when
notifications should be placed (e.g. in the company
newsletter, local newspaper or mailings to suppliers).
Step 5: Implement your plan.
Its important to get started. Some of the components take

more planning than others, so you may begin implementing
parts of your succession plan before the entire plan is
complete.
Use the Action Plan and Progress Chart to help you track
your progress.
Step 6: Review and modify your plan.
Do not let the dust settle on your plan once it is developed.

Things change quickly in the business world and even in
ones personal life. Review and revisit your plan at least
once a year.
15
Next Steps
Your next steps depend on how much work you have already done.
By reading this guide, you have raised your awareness
of both the importance of preparing your business for
succession and what it takes to get started. Completing
the checklist will help you develop a structured succession
plan. By planning now, you are positioning your business to
receive maximum value, as well as selecting and developing
future leadership so your legacy can continue according to
your vision.
Your next steps depend on how much work you have
already done. Regardless of where you are now in the
succession planning process, keep going. Plan to transfer
your business in manageable stages. Start small and finish
strong. Canadian business owners who have a succession
plan in place strongly agree that it has been a worthwhile
investment of their time.
Resources for Employers and Business Owners

General business publications
To get your copy of the following free government

publications and posters:
Order or download a copy from the Alberta Learning
Information Service (ALIS) website at www.alis.gov.
ab.ca/careershop
Contact the Learning Resource Centre
- Phone: (780) 427-5775
- Fax: (780) 422-9750
Call the Alberta Career Information Hotline at 1-800661-3753 toll-free in Alberta or (780) 422-5283 in
Edmonton.
Visit an Alberta Employment, Immigration and Industry
service centre. Call the Hotline for information about the
centre nearest you.
Publications and posters
Alberta Careers Update 2004
This book looks at the global and provincial trends affecting
Albertas economy and society. These trends have an impact
on occupations in the province and can affect career
planning decisions. An Occupational Outlook section
includes projections for more than 500 occupational groups.
Better Balance, Better Business:
Options for work-life issues
The often conflicting demands of work and personal time
commitments of employees can create stress and other issues
for both employers and workers. This publication presents
employers with the business case for why they should care
about this issue, ways to improve the situation that will
benefit both employers and employees and ideas about
making useful changes.
Employing a Diverse Workforce:
Making it work (available Fall 2007)
Employing a diverse pool of workers makes good business
sense. This book provides employers information about how
to support employees diverse in age, race, gender, physical
ability, values, religion, culture and experience.
Employment Series for Persons With Disabilities:

Tips for employers
Today, more and more employers are hiring persons with
disabilities. This book provides employers with a practical
business approach, including numerous resources and
answers to typical concerns and questions.
Finders & Keepers: Recruitment and retention strategies
This publication provides proven strategies and practical
tools to help small- and medium-sized businesses attract,
recruit, select and retain employees. Finders & Keepers
condenses best practices and current research into practical
and affordable steps. Additional resources and templates
help employers meet the challenge of effective recruitment
and retention.
A Guide to Rights and Responsibilities
in Alberta Workplaces
If you are new to the workplace or an employer in a smallor medium-sized business, this publication can help you find
answers to questions about employment standards, health
and safety, human rights and workers compensation. A list
of phone numbers and websites direct you to contact people
and information to help you stay within workplace rules.
A complementary poster, Sources and Resources: Workplace
rights and responsibilities, highlights key workplace contacts.
Lets Talk: A guide to resolving workplace conflicts
The conflict resolution methods presented in this
publication are helpful for employees and employers of
large, medium and small organizations, whether its a private
sector company or a not-for-profit association. Lets Talk
contains information on how to handle situations internally
and where to get outside help.
Labour Market Information for Your Business:
A practical guide
This publication presents a business case for achieving
greater productivity by using labour market information.
It includes a generic model for researching, analyzing and
using such data, case studies that point out common ways to
benefit from labour market information and where to find
current, reliable information.
Positive Works at Work (poster)
Looking for a little inspiration to blend with the
perspiration around the worksite? This two-poster set has
positive messages about attitude and getting along in the
workplace.
17
Safe and Healthy:

A guide to managing an aging workforce
This publication examines perceptions and realities about
the capabilities of the older worker and offers employers
ways to keep workers of any age safe and healthy on the job.
Skills by Design: Strategies for employee development
This publication builds the case that any business, no
matter how small, should have the tools and know-how to
do regular inspections, maintenance and enhancement of
employee skills. It features the why, how and practical what
of developing employee skills.
X-treme Safety:
A survival guide for new and young workers
Using the analogy of X-treme sport, this survival guide for
young, inexperienced workers is packed with information
about Albertas workplace health and safety regulations and
employment standards.
Tip Sheets
A number of tip sheetsshort, easy-to-read articles on
career, learning and employment topicsare available on
the ALIS website. Search alphabetically or by audience
(including employers), keyword or topic.
Website: www.alis.gov.ab.ca/tips
Occupational and labour market information
OCCinfo
This section of the ALIS website provides more than 530
occupational profiles, including information on duties,
working conditions, salaries, employment outlook, personal
characteristics and required educational qualifications.
Search by title, subject, interest or industry.
Website: www.alis.gov.ab.ca/occinfo
Wage and salary survey
This biennial survey provides wage and salary information
for Alberta employees by occupation, geographic area
and industry group. It also provides information on top
occupational vacancy rates by the eight economic regions.
Website: www.alis.gov.ab.ca/wageinfo
For other labour market information, visit the Alberta
Employment, Immigration and Industry website at
www.employment.gov.ab.ca/lmi
Other relevant resources

On-line resources
BDO Dunwoody LLP

Business Succession: A Game of Options
www.bdo.ca/en/images/BDONewsletterEnglish.pdf
Succession Planning for Family Business
www.bdo.ca/library/publications/familybusiness/
succession/planning1.cfm
Business Development Bank of Canada
Make it Work for Your Family
www.bdc.ca
Transition PlanningBDC
www.bdc.ca/transition
The Business Link
www.cbsc.org/alberta
Canada-Ontario Business Service Centre
www.cbsc.org/ontario
Canadian Federation of Independent Business
Succession Can Breed Success
www.cfib.ca/research/reports/rr3007.pdf
Succession Planning Tips
www.cfib.ca/research/businfo/pdf/din0551.pdf
I s your business ready for your retirement? Key questions for
SMEs regarding succession planning
www.cfib.ca/pdfs/succession_qa_e.pdf
Canadian Heritage
Succession Planning for Book Publishers: An Overview
www.pch.gc.ca/progs/ac-ca/pubs/succession/index_e.cfm
Cataract Savings and Credit Union
http://develop.danima.com/estate
Family Business Institute
www.familybusinessexperts.com
Industry Canada
Managing for Business Success
www.strategis.ic.gc.ca/sme-management
KPMG Canada
Succession or Sale
www.kpmg.ca/en/services/enterprise/issuesSale.html
Meyers Norris Penny

www.mnp.ca
Ontario Ministry of Agriculture, Food and Rural Affairs
Components of a Farm Succession Plan
www.omafra.gov.on.ca/english/busdev/facts/04-073.htm
Predictable Futures Family Business Centre
www.predictablefutures.com
PriceWaterhouseCoopers
www.pwc.com/eng/main/home
Sun Life Financial
Business Succession Planning, Owners Guide
www.sunlife.ca/advisorsite (Under Strategies &
Concepts, choose Business Succession Planning)
Publications
The Canadian Small Business Owners Guide to Financial

Independence. Barry and Mark NcNulty. Toronto: Insomniac
Press, 2006.
The Definitive Guide to Retiring from Your Business. RBC
Royal Bank. Toronto: General Content Corporation, 2002.
Exit Right: A guided tour of succession planning for families in
business together. Mark Voeller, Linda Fairburn and Wayne
Thompson. Summit Run Inc., 2002.
The Family Business Succession Handbook. Mark Fischetti
(Ed.). Philadelphia: Family Business Publishing Co., 2001.
Family Business Succession: The Final Test of Greatness.
Craig E. Aronoff, Stephen L. McClure and John L. Ward.
Marietta: Business Owner Resources, 2003, 2nd ed.
Investing in Your Future: Building a Succession Plan.
Canadian Federation of Independent Business. Toronto:
CFIB, 2006. Members of CFIB can order this publication at
(780) 421-4253 or (403) 444-9290.
Keep the Family Baggage out of the Family Business: Avoiding
the Seven Deadly Sins That Destroy Family Business. Quentin
J. Fleming. New York: Simon & Schuster, 2000.
Selling Your Business Successfully: Tips, Strategies, and Tools.
Rexford E. Umbenhaur, III. New York: John Wiley and
Sons, 2003.
The Small Business Valuation Book. Lawrence W. Tuller.
Holbrook: Adams Media Corporation, 1994.
19
Appendix: Succession Planning Templates

Tools to get you started.
The following templates are also available on the
Alberta Learning Information Service (ALIS)
website at www.alis.gov.ab.ca/careershop (click on
the publication title).
Succession Plan Framework and Checklist

This guide outlines what a basic plan would include.
Please place a check mark (3) beside each of the
succession planning components that you have
completed to date.
Examine all the statements where you did not
place a check mark.
Based on your situation, place these statements in
order of priority.
Proceed to the How to Develop Your Business
Succession Plan section of this guide for more
information on continuing to develop your plan.
Gather information and write your plan.
Goals and objectives
Identified the stakeholders of my business

Established the need for a succession plan
Developed a business vision
Established business goals
Established personal goals
Established retirement goals
Created a team of advisors
Exit strategy
Reviewed options for my exit from the business

Made exit strategy decision based on identified
options
Business valuation
Obtained professional advice about the value of my

business
Determined the value of my business
Determined current value of business assets and
liabilities
Determined the goodwill value of the business
Business structure and organization
Paid business debt

Hired and retained productive staff
Structured business to maximize value
Documented key processes and procedures
Tax and legal considerations
Tax considerations
Developed financial objectives
Aware of tax implications of current business
situation
Planned and implemented tax strategies
to minimize taxes
Legal considerations
Developed shareholders agreement
Developed current buy-sell agreement
Estate plan
Made arrangements to provide for my spouse and

children
Completed my will, power of attorney and personal
directive
Minimized inheritance taxes, probate costs and other
legal fees
Selected a trusted advisor to settle the state
Successor selection
Developed successor criteria

Developed questionnaire to assess candidates for
succession
Selected a successor
Communicated with successor
Advised key stakeholders of successor
Successor training
Assessed skills needed by successor

Developed plan for successor training
Developed mentoring program for successor
Established timelines
Contingency plan
Developed a contingency plan

Obtained disability insurance
Obtained personal life insurance
21
Conflict resolution
Documented the roles, responsibilities and

expectations concerning the transition
Identified a facilitator who knows my wishes and will
work with the stakeholders through the process of
succession
Timelines
Determined timeline for transition of management

of the business
Determined timeline for transition of ownership of
the business
Determined timeline for full exit from the business
Communications plan
Documented succession intentions

Documented how to proceed with succession should
an unforeseen event, such as an accident or illness,
occur
Documented the business transition or exit strategy
Obtained critical illness insurance
to inform family, employees, clients, suppliers and
Obtained business insurance
community
Obtained key person insurance

Obtained overhead business insurance
Trained a key employee to take over in the case of an
unforeseen event
Communicated the plan to family
Communicated the plan to key employees/
stakeholders
Communicated the plan to my advisors
Action Plan and Progress Chart

Task

Action
Who
Required
Date
Completed
Comments.
23
Feedback
Wed like to hear from you ...
Leaving Your Small Business: Your plan for a successful transition
Date
Send your comments to the addresses or fax number provided at the bottom of this page:
What specific information in this publication did you find useful? How did it help you?
How could we improve this publication? What was not useful?
Do you have any suggestions for other information or other publications that would be of value to you?
To receive a catalogue of our publications and posters, complete this section:

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Organization
Address

Phone
Postal Code
Fax
Send to
People, Skills and Workplace Resources

Mail:
12th Floor, South Tower, Capital Health Centre,

10030107 Street, Edmonton, AB T5J 3E4
or Fax:
(780) 422-5319
or E-mail:
your catalogue request and/or comments to info@alis.gov.ab.ca
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HUM A N R E S O U R C E S T R AT E G IES FOR EMPLOYERS

Leaving Your Small Business:

This book is for

2007 Government of Alberta

What is Business Succession Planning?............................. 3

Why Plan for Business Succession?.................................... 4

Protect years of hard work.................................................................

How to Develop Your Business Succession Plan............... 6

Step 1. Initiate discussion with stakeholders...................................... 6

Alberta Employment, Immigration and Industry............................. 16

Did You Know?

Canadian Federation of Independent Business. 

What is Business Succession Planning?

Did You Know?

A business succession plan is a living document that

Why Plan for Business Succession?

Additional reasons for having a succession plan could

As an entrepreneur, you have likely put your heart and soul

Your small business could be big business in your

Canadian Federation of Independent Business. 

of your business and would be affected if you simply

Prepare for the future

A succession plan gives you the opportunity to share your

You can prepare your business for transition by examining

Succession planning takes your financial future and that

Preparing the business

Unfortunately, emergency succession planning often

How to Develop Your Business Succession Plan

Succession plan framework and checklist

Review the Succession Plan Framework and Checklist

Six steps to building your

Who should you talk to? Begin by speaking with your

ensure that all are heard. As well, roles, responsibilities and

Since most small business owners are planning to use their

Step 3: Develop your advisory team.

Is there a buy-sell agreement that needs updating?

Regardless of the size of your business, you will need a team

Should you revise your shareholders agreement?

The benefit of having an advisor, whether it be an

Are members of your family also partners?

BDCBusiness Development Bank of Canada. Make it work for your family. 

Corporate or tax accountant

insurance policy on you? Insurance can support your

Now you have an idea about preparing a succession plan:

Where does your business fit into this?

General goal: To put more money into my pocket when

M = Measurable: How will you measure your desired results?

Selling the business. Businesses must be prepared for

General succession experience

How will you determine what you will sell?

BDCBusiness Development Bank of Canada. Transition Planning top questions. 

If you were looking from the outside in, would your

While planning your estate is a similar process to business

- What can you do to minimize tax implications?

Finding and keeping a successor

Your plan will depend on whether you have already selected

Would working outside the company help the successor

Who is aware of the plan and knows where to find the

Advisors are key to succession planning

Importance of communicating your plan

Its important to get started. Some of the components take

Do not let the dust settle on your plan once it is developed.

Resources for Employers and Business Owners

To get your copy of the following free government

2007 Government of Alberta

Canadian Federation of Independent Business.

Canadian Federation of Independent Business.

BDCBusiness Development Bank of Canada. Make it work for your family.

General goal: To put more money into my pocket when

M = Measurable: How will you measure your desired results?

Selling the business. Businesses must be prepared for

BDCBusiness Development Bank of Canada. Transition Planning top questions.

- What can you do to minimize tax implications?

Would working outside the company help the successor

Who is aware of the plan and knows where to find the

Obtained professional advice about the value of my

Made arrangements to provide for my spouse and

Documented the roles, responsibilities and

Determined timeline for transition of management